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# Practice Exam ProblemZazzy Company reported the following information for the year 2018: /> Zazzy Company Income Statement For the Period Ended December 31, 2018 Sales \$636,000 Cost of Goods Sold 240,000 Gross Profit 396,000 Office Expenses 242,000 Depreciation Expense 9,000 Income from Operations 145,000 Interest Expense 0 Income before Income Tax 145,000 Income tax expense 120,000 Net Income \$25,000      Zazzy Company         Comparative Balance Sheets                  December 31, 20XX 2018 2017 Assets: Cash and cash equivalents \$84,000 \$48,700 Accounts Receivable 53,600 50,000 Inventory 39,600 39,000 Prepaid Expenses 5,500 15,000 Equipment 206,000 200,000 Accumulated Depreciation - Equipment (126,700) (117,700)       Total assets \$262,000 \$235,000 Liabilities: Accounts Payable \$48,000 \$49,000 Accrued Liabilities 44,000 42,000 Stockholders' Equity: Common Stock 10,000 9,000 Retained Earnings 160,000 135,000        Total Liabilities & S/H Equity \$262,000 \$235,000 Additional information:1.    No equipment was sold throughout the year, so the change in accumulated depreciation is a result of depreciation expense for the year.2.    Stock was issued for cash.3.    Equipment was purchased with cash.Please explain:1.    Help explain a FULL statement of cash flows for the year 2018, including the Operating, Investing and Financing sections, assuming that Zazzy Company uses the INDIRECT method.2.    Can a company have a positive cash flow and negative income? What about positive income and negative cash flow? Explain your answer.Practice Problem Part BHelp explain the FULL Statement of Cash Flows for Zazzy Company for the year 2018, assuming they use the DIRECT method.

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